There are many reasons to decide to sell a home, and possibly as many reasons to sell for less than a home is worth. The significant differentiation for those selling at a loss is whether they have a mortgage or not.
When a mortgage is in play, the bank will issue a loan for the difference, unless you can qualify for a short sale. In other words, you would have to qualify for a hardship that would allow the bank to waive the remaining balance that is not covered by the sale of the property.
In still other cases, parent may want to sell their property to their children to avoid inheritance or gift taxes. So, instead of charging Junior, who is now 45 with three kids of his own $750,000, Dad will sell the property for $1. That is all fine and good if there is no mortgage.
“We Buy Houses companies have a bad wrap, or at least that’s the impression we’ve gotten since we got started. But our service is simple and we tell it to people like it is. If you want to get out of your property, mortgage, etc, then we want houses,” said the owner of the Florida branch of www.911webuyhouses.com.
However, if Dad has refinanced and has a mortgage still, well into retirement, then his son will have to qualify for at least the value of the remaining mortgage.
If Dad has been busy saving his money and investing in property, then he could be (and in this example) is worth more than $5.5 million. In that case the heirs to the estate will have to pay out on capital gains taxes.
Though, if dad just has the house and it is worth less than $5.5 million, then there is no federal tax on the estate if the family moves into the home. Rather than selling the house to them, you may instead just do a quit claim deed giving them the house for whatever they choose.
If there is no mortgage, that means they can decide whether they want to live there or sell it. They may even decide to rent it out to other people.
Mortgage And Title Differences
People often hear owning a home and think of only one aspect — the mortgage that tethers them to it. Yet, a mortgage just says who is paying the bill on it. Separately, there is a title that is recorded with the county or local government. It gives an indication of who has a claim to the property.
Many elderly parents with grown children will put their kids’ names on the title for other reasons other than with giving their heirs an inheritance. They will do so to make it easier to enter a nursing home using the home as collateral to pay the nursing home or retirement home bills.
There are rights however, and it is worth mentioning the main one. It generally requires a signature of the party that is entered onto the title along with a notary to add people to a title. Otherwise, if kids are about to buy a property and the title company does a search, the kids may find that they are already on their father’s property when they never signed anything.
It actually constitutes fraud and may be punishable by law, depending on local laws. Parents: always get your kids’ permission and then get their signature on the title. Doing otherwise can cause them hardship later and cause a rift in your relationship.
In addition, if your adult child does sell their own property through a short sale it will look bad if they have their name on title to your property. They may have no financial hand in your property and you may be trying to be nice. Give them gifts only as long as they agree to them.